The International Monetary Fund has warned that George Osborne's austerity measures may need to be rethought.

A report on the UK economy, published on Thursday, said: “The planned pace of structural fiscal tightening will need to slow if the recovery fails to take off even after additional monetary stimulus and strong credit easing measures.”

This will come as a blow to David Cameron, who on Thursday told The Daily Telegraphthat austerity could in fact last until 2020.

It is also bad news for George Osborne, who two years ago, in reference to whether there was any alternative to tightening the purse strings, said “there is no plan B”.

The IMF recently stated that the Coalition's austerity measures were the right course of action, but it doesn't appear to think so any more.

The report said: “Recovery has stalled. Post-crisis repair and rebalancing of the UK economy is likely to be more prolonged than initially envisaged.

“Confidence is weak and uncertainty is high. Looking ahead, the economy is expected to grow modestly, but with current policy settings the pace will be insufficient to absorb significant slack in the economy, raising the risk of a permanent loss of productive capacity.”

Ed Balls, Labour’s shadow chancellor, in response to the IMF’s report, said: “This is a very serious warning to the Chancellor that urgent action to boost jobs and growth is needed. How much longer must we wait, and how much more damage must be done, before George Osborne finally does the most important u-turn of all?

“The IMF is clear that the government’s economic plan - Plan A - has failed. They say that weak growth means the government will miss its debt target and that the Chancellor’s existing policies risk causing permanent damage to the British economy."

Meanwhile, Mehdi Hasan, Political Director of The Huffington Post UK, said: “This isn’t what an under-fire George Osborne will have wanted to be reading ahead of his summer break. After all, he has spent the past two years constantly, loudly, publicly invoking the IMF as a committed supporter of his plan A for Austerity.”